INTERVIEW: Small US SAF plants well-positioned for investment amid turbulence, XCF CFO

Sustainable aviation fuel could see turbo-charged demand growth in the years to come, but with volatile prices and political headwinds in the US, investment in the near term will likely be limited, according to the chief financial officer of SAF producer XCF Global.

Larger facilities often require substantial upfront capital and are heavily reliant on long-term offtake agreements, which can be challenging to secure in the current market, XCF's Simon Oxley told Platts, part of S&P Global Commodity Insights, in an April 4 interview. The absence of established market norms and the lack of long-term contracts with airlines, which typically have weak balance sheets, create significant risk for investors, he added

By contrast, small modular projects are more attractive to financing because they require lower initial investments, can be developed incrementally and are more agile in response to market conditions, Oxley said.

"The airline industry is not slowing down, demand for planes is not slowing down," he said. "So what we want to be able to do is sort of fill that gap and that gap does exist."

XCF intends to be a leading producer of SAF in North America. It recently completed its acquisition of New Rise Renewables, which can produce 38 million gal/year of SAF, or just over 3,300 b/d of neat or unblended SAF, at its unit in Reno, Nevada. In the US, SAF is blended with petroleum-based jet fuel at a blending ratio of 10% to 50%. XCF is expected to become a publicly listed company on Nasdaq, it has said.

XCF plans to have neat SAF production capacity of more than 150 million gallons, or just over 13,000 b/d over the next five years, the company said in March 2024. To that end, XCF has acquired two locations -- one in Wilson, North Carolina, and Fort Myers, Florida. Total blended SAF production capacity could reach 1 billion gallons/year, the company said. XCF uses distilled corn oil, a waste product, as feedstock.

Volatile pricing environment

Part of US President Donald Trump's election platform was hostility to the climate-friendly policies of his predecessor Joe Biden.

This weighed heavily on renewable identification numbers. D4 RIN prices slumped from 91.25 cents/RIN Jan. 20, when Trump took office, to 74.5 cents/RIN March 13. However, they have since firmed; Platts assessed them at 104.25 cents/RIN April 4.

Much of the investment in facilities created by Biden's Inflation Reduction Act was in red states, such as Georgia and Texas, and members of Congress from those states have pushed back against plans to undermine biofuel plants in their constituencies. As such, ethanol earmarked for transport fuels looks safe for now, Oxley said.

"In order for them to change the tax rules, they need a change in law and they would need 100% Republican support in order to be able to push it through," he said.

SAF has strong growth prospects and has no substitution risk, unlike renewable diesel, which has seen a number of projects face bankruptcy, Oxley said.

Converting renewable diesel plants to SAF output, a similar product, in relatively short order, becomes "quite an interesting way" to participate in the SAF market, he said.

There are a lot of renewable diesel facilities that have gone through bankruptcy, been restructured and have a lot of counterparties who are holding equity but do not want to, Oxley said.

XCF's Reno facility was previously a renewable diesel facility.

The uncertainty that is being created by the Trump administration's decarbonization-averse policies, not least in relation to the large, IRA-related loans, means that the larger projects struggle to attract finance, Oxley said.

"They're too big; they're not in the sweet spot, whereas our approach is more modular," he said. The important difference is going to be XCF's ability to issue equity, bring new parties onboard, with new businesses onto the platform, and grow in an expedited basis that way, he added.

Some forecasts predict growth continued growth in renewable diesel. Renewable diesel demand in the US will rise to 39.277 million mt in 2050 from 11.785 million mt in 2025, according to data from analysts at S&P Global Commodity Insights. US SAF demand will grow to 32.325 million mt in 2050 from 2.118 million mt in 2025, the analysts said.